How to Make a Personal Budget in 7 Simple Steps
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You may be wondering how to make a budget. If so, you’re in the right place.
Did you know over half of Americans do not have a budget? That’s a huge amount of people who aren’t tracking their money.
What Does a Budget Do?
A monthly budget is a plan of how you will spend your money. I truly believe that everyone should know where their money is going.
If you create a budget you will be much closer to reaching your financial goals. I started budgeting a few months after I got married. Mostly, because we needed to make sure we had enough money each month.
Budgeting your money is useful when you are trying to save money or when you are trying to stay within the amount of money you bring in.
It’s important to make a budget so you see where your money is going every month. I have a personal conviction to be a good steward of money (Prov. 21:20). I can’t stand the idea of not seeing exactly where I spend my money each month.
It doesn’t matter how much money you make. Every size income level should have a budget. The first step is realizing that you need a budget. If you have the wrong attitude your budget will fail.
Budgeting doesn’t have to be time-consuming. Don’t think of it as a hassle. Think of it as having control of your finances. You will have to put a little thinking time in but once you have your budget set, it’s simple.
The main part of my personal budget always stays the same. We may have little changes each month depending on our needs. For example, I have three children.
We may budget for something that they are asking for or someone’s birthday may be coming up and we need to budget for that. I always have a good feeling of knowing where my money is going.
How to Make a Budget in 7 Steps
1. Calculate your Budget Expenses
This is the most important step in starting a budget. In most situations, one person in the household manages the money (I manage my household money).
Everyone who is involved in financial decisions should sit together and calculate expenses. Calculate everything you need to live your life. You should have fixed expenses and variable expenses.
You should use a free budget template or a printable budget planner. to keep track of your budget. Sometimes it’s easier to have your budget on paper when you are trying to figure it out. I use a free online budgeting tool now that I have my budget set.
You should be setting amounts for the following (this is an example of mine):
- Utility Bills (Water, Natural Gas, Electricity, Cable, Phone, Trash, Sewer)
- Cell Phone Bills
- Car Payment
- House Insurance
- Car Insurance
- Health Insurance
- Retirement contributions
- Life Insurance Contributions
- Emergency Fund
Here are 75+ Personal Budget Categories You Should Be Using.
2. Determine your Budget Income
Now it’s time to figure out your income. Add up all the sources of income you receive each month. We live on one income so we only receive my husband’s paycheck.
Sometimes I earn extra money but it’s very simple for me to add that in when I receive it. I don’t rely on it each month to survive. Our reliable income comes from my husband’s job.
3. Determine your Budget Allowance
These are things we need in life but we need to set a limit on each month. Here is an example of my allowances:
- Auto Gas – My budget is $200 a month because we live in a small town. This changes if we travel more often.
- Groceries – My budget is set to $600 a month for groceries. This gives us $150 to spend per week. This is perfect for our family. I have a hungry husband and three hungry children so I have to make sure I create a grocery list and stick to it in order to stay at $150. You should check these tips to save money on groceries.
- Eating Out – My budget is set to $200 a month. We usually break it into four $50 meals. If we want to eat somewhere more expensive, we’ll eat out 3 times a month and do two $50 meals and one $100 meal. In order to achieve this, we use restaurant coupons and local discount cards.
4. Set Saving Goals and/or Debt Pay Off Goals
These are things that are very important when you budget money. If you don’t figure them into your budget, you will overlook them.
If you have debt, you need to include paying that down in your budget. Bad debt weighs down your credit so you should also learn during this process.
For a long time, I figured I would save whatever money we had leftover in our savings account. Well, that didn’t work for us. We ended up spending all of it every month.
Now, my husband and I discuss what we want to save for each month. I add it to the budget and we work on meeting that goal.
5. Set your “Wants” Expenses
These are the things you “want” each month. You don’t need these items to survive. Some examples of “wants” are going to Starbucks, going shopping for something you don’t need or your kids asking for something at the store.
I’m really strict about these things on our budget. I purchase my kids the things they need.
It’s very rare that I get the things they “want”. We’ve encouraged them to buy things on their own. I was a child with lots of things and it didn’t benefit me very much.
I ended up being ungrateful because I was handed everything. When I had to support myself, it was hard.
These tips for managing money are essential for financial success.
6. Track Your Spending
I track my spending with the . It’s very easy to set up. I have the app on my phone. Every time I spend money on something, I add it to the category in my budget.
7. Just Say No!!!
It’s tough keeping your budget in order. You may need to give up luxuries for a while. I don’t need much to survive and I’ve found that out by trying.
I just need the basics: Jesus, family, shelter, and food. It would be nice to treat myself but I can do without it. Try it, you may surprise yourself.
When my kids are bugging me to buy them stuff, I just say NO! They’ve learned that they can use their own money for their “wants”.
Money can cause a lot of problems in a marriage and you don’t want to allow that to be a problem. Make sure you are praying about it. The Lord should be the center of this process.
Don’t allow the challenges of budgeting to get you off track. Remember your goals and stick to them. Here are some budgeting tips that have helped us over the years.
Budget Tip #1 – Make your spouse a part of the budget. My husband and I usually see more eye to eye when I give him dollar amounts of where we are at.
You need to be on the same page about debt and your budget. We try to discuss our needs each month and see if we can pull it off.
If we can’t, we agree it’s a “NO”. We’ve already been in deep credit card debt and we both agree that we don’t want to get back in it.
Honestly, my husband trusts me with our budget but it’s important for him to know what’s going on. He gets frustrated with our budget boundaries but he usually comes around.
Budget Tip #2 – Eat at home. We have found that our food at home is more satisfying than when we eat out. I’ve committed myself to making dinner 7 days a week.
It’s hard but I push myself through it. My kids are homeschooled so they eat lunch at home and my hubby works close to home so he comes home every day for lunch. We eat at home 95% of the time.
If your family isn’t home to eat, have them pack a lunch. I make it a point to make a little extra dinner for leftovers. It works out well. Trust me, it’s an adjustment but it’s totally possible. We’ve been doing this for the past several years and are thriving.
Budget Tip #3 – When you do eat out, utilize cost-saving ideas. We usually skip getting a drink when we eat at a restaurant. It’s water all around. Once drinks started being $2 or more each, we went to water. That’s $10 for the 5 of us.
That’s equivalent to another entree! If we eat fast food, my husband will get a drink and I get the kids a drink to share.
We used to be able to have the kids split meals but they are growing so much that they need their own meal. My husband and I will often split a meal depending on what it is.
Budget Tip #4 – Give the kids a heads up. I’ve talked to my kids on multiple occasions about managing money. They know by now that we don’t use money that we don’t have. I’ve laid out what they can expect from us. We provide them with everything they need and not everything they want. Here’s a glimpse:
- I buy them 1 -2 pairs of tennis shoes a year. The amount depends on if it’s a name brand or not. This year my daughters wanted $75 shoes so they got 1 pair for the year but my son got 2 because he isn’t picky like them. I also buy them 1 pair of flip-flops each year.
- I buy them clothes twice a year. Once in the Spring and once in the Fall. My clothing budget for all my kid’s total is around $600 a year. We do live in a snowy climate so I buy them snow boots and snow clothes every couple of years. I like to get them a little bigger so they last longer.
Budget Tip #5 – Plan ahead. We love taking vacations but they cost money. We have to project our vacations ahead of time so we can save enough money to have a good time. We usually travel close to home so we aren’t incurring the cost of paying for stuff like plane tickets.
When we travel, we try to stay in places where we can make our own food. We plan to eat out 2 -3 times but the rest of the time we eat in. I would much rather spend money on doing something fun than restaurant food.
Budget Tip #6 – Stop looking at other people’s spending habits. Everyone is in a different situation financially. It’s easy to look at someone else and wish you were where they are.
The truth is, you don’t really know where they are. They may appear to be well off but their finances are in ruin. You need to focus on your situation and goals.
How to Use Your Budget
Learning how to budget money is a step in the right direction. I highly recommend that everyone creates a budget. Budgeting your money will give you freedom in your finances.
I’m constantly trying to update my blog with money-saving tips. Make sure you are subscribed to my newsletter or check my blog often for new tips.
Hopefully, this has helped you get your budget in order. Remember, that I’m on this journey with you.
Now that you have your budget set up, you should get familiar with the best ways to save money. Saving money doesn’t have to be a hassle.
It’s actually fun once you get the hang of it. As I mentioned above, learning to save money has rubbed off on my family. Now we are all on board and trying to help each other find the best deal.
With prices going up all the time, it’s essential to know what you can get for your money. This is really important for kids to learn. They will thank you for teaching them.